A severe supply-demand imbalance coupled with high construction costs will make for a troubling journey to normalize the housing market, a recent Bank of America (BAC) Global Research report says.
Existing home sales have declined this year, while demand continues to be high. “Mortgage purchase applications and existing home sales have been declining this year and we expect further slippage,” the report noted. “In contrast, we see upside for new home sales and housing starts but with speed bumps due to high costs.”
Home prices have risen sharply over the past year; 2021 alone has yielded an increase of 13%. The report describes the current price trajectory as unsustainable and predicts that price appreciation will cool next year.
After the pandemic first hit the U.S. in early 2020, home buying and selling declined as the economy slowed to a halt. Now, more than a year after the onset of the pandemic, buyers are more plentiful…